Akira Takayama: A Memoir

When Akira Takayama passed away this winter, the economics profession lost one of its most productive and most passionate members. This memoir catalogues Professor Takayama's publications and offers some insight into his contributions and personality from a few of his colleagues.     

On FDH efficiency analysis: Some methodological issues and applications to retail banking,courts, and urban transit

The methodology of free disposal hull (FDH) measure of productive efficiency is defined and put in perspectivevis-à-vis other nonparametric techniques, in terms of the postulates on which they respectively rest. Computational issues are also considered, in relation to the linear programming techniques used in DEA. The first application bears on a comparison between a private and a public bank, in terms of the relative efficiency of their branches. Important characteristics of the data are revealed by FDH that are not by DEA, due to a better data fit. Next, efficiency estimates of judicial activities are used to evaluate what part of the existing backlog could be reduced by efficiency increases. Finally, with monthly data of an urban transit firm over 12 years, the FDH methodology is extended to a sequential treatment of time series, that supplements efficiency estimation with a measure of technical progress.     

Adjustment in General Equilibrium: Some Industrial Evidence

The link between output changes and factor-mix adjustments in general equilibrium is examined for each of nine industries using pooled data from 12 developed countries over the years 1970–85. Specifications of the Stolper-Samuelson theorem and the specific-factors model of production are built on the assumptions and structure of theory with each industry isolated in turn. In their simplest version with only capital and labor input, these competitive general-equilibrium models explain a good deal of the observed variations in industrial factor mixes. The specific-factors model performs better.     

Differences of Opinion of Public Information and Speculative Trading in Stocks and Options

We analyze the effects of differences of opinion on the dynamicsof trading volume in stocks and options. We find that disagreementsabout the mean of the current- and next-period public informationlead to trading in stocks in the current period but have noeffect on options trading. Without options, we find that disagreementsabout the precision of all past and current public informationaffect trading in stocks in the current period. With options,only disagreements about the precisions of the next- and current-periodinformation affect stocks and options trading in the currentperiod. Our results suggest that options trading is concentratedaround information events that are likely to cause disagreementsamong investors, whereas trading in stocks may be diffusiveover many periods.     

Evaluating Government Bond Fund Performance with Stochastic Discount Factors

This article shows how to evaluate the performance of managedportfolios using stochastic discount factors (SDFs) from continuous-timeterm structure models. These models imply empirical factorsthat include time averages of the underlying state variables.The approach addresses a performance measurement bias, describedby Goetzmann, Ingersoll, and Ivkovic (2000) and Ferson and Khang(2002), arising because fund managers may trade within the returnmeasurement interval or hold positions in replicable options.The empirical factors contribute explanatory power in factormodel regressions and reduce model pricing errors. We illustratethe approach on US government bond funds during 1986–2000.     

Fluctuations in convex models of endogenous growth, II: Business cycle properties

Using ideas from the endogenous growth literature, we present a model of the endogenous determination of productivity growth based on individual worker decisions about human capital investment. We calibrate a version of the model to match long run growth facts from the US and study the business cycle properties of this model. This approach offers improvements along several dimensions over standard exogenous growth methodologies. Most importantly, our stochastic endogenous growth model generates much greater serial correlation in output growth and labor supply volatility relative to its real business cycle counterpart. We conclude that using the extra discipline of reproducing the trend productivity growth features of the data endogenously constitutes an important missing component from the real business cycle approach.